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Dynamics of food trade

July 02, 2012


THE high food inflation and insufficient production of some food crops are making eatables unaffordable for low income-groups amidst rising poverty. Food security is not in sight in spite of the current government’s focus on agriculture.

The crop production-mix and pricing of farm produce also leave very little room for maximising food exports. The country remains a net importer of foodstuff because of backward cultural practices in agriculture.

No doubt efforts are being made by stakeholders to increase per acre yields of food crops, add value in food exports and find import substitutions. But these efforts are not enough.

No doubt, the recent expansion in edible oil refining and increase in local oilseed production has substantially cut down imports of soyabean oil. Import of soyabean oil fell 50 per cent year-on- year to about 32500 tonnes in eleven months of FY12.

This reflects growing consumption of domestic oilseeds including cottonseed, sunflower, rapeseed, mustard and canola. The production of cooking oil remained unchanged above 256000 tonnes in ten months of the FY12 from the same period of FY11.

And production of vegetable ghee at 97,000 tonnes even showed a slight growth of 2.5 per cent while imports of palm oil is up by five per cent up, much of it contributed by a surge in May.

In last few years, the production of major food crops i.e. rice, wheat, sugarcane and maize have exhibited a mixed trend. In some cases, outputs have increased or remained static and in other cases a declining trend has been witnessed.

Whereas a major incentive in terms of higher support prices has often brought about substantial growth in production (as in case of wheat in crop year 2010-11 and in case of sugarcane in crop year of 2011-12) no big change has been recorded in per acre yields of other major crops.

Record wheat output of 25 million tonnes in 2010-11 enabled us to export the commodity in 2011-12. Similarly a record 58 million tonnes of sugarcane in 2011-12 has opened up opportunity for exporting sugar.

“But the key question is how to boost food exports without losing sight of food security, the plainest indicator of which is food inflation,” says an official of the Ministry of Food Security and Research—the ministry that the federal government has created after handing over agriculture entirely to the provinces under the 18th constitutional amendment.

If excess availability of wheat or sugar in any given year makes its exports feasible and if that helps in checking food trade deficit or even creating food trade surplus, it is no big deal.

The situation may change next year. “We have to find ways of boosting rice exports whose output has been historically higher than domestic consumption. But in that too we need to first have more and more exportable surplus every year and then try to develop brand names and go for value-added rice-based food products to fetch maximum per unit value,” says a former chairman of Rice Exporters Association.

Rice exports in eleven months of FY12 fell more than 7.5 per cent to about 3.13 million tonnes while the foreign exchange earnings slipped just 3.6 per cent to $1.9 billion.

Normally if export quantity falls steeper than export earnings of a particular item it shows that the product is selling at a higher price. “Now there could be two factors behind it. Either, the increase in per unit value is in line with the trends in global prices or because our exporters have moved towards branding and value-addition.”

A Karachi-based exporter of frozen fish pointed out an equally important factor which has lately featured in our exports. “When we find new markets or reach out to new buyers and the products we offer are of good quality we manage to get a better price.”

He was of the view that that has enhanced export earnings of fish and fish products which rose 11 per cent to about $300 million in eleven months to May 2012 even though volumes of these exports declined two per cent. “The ban on fish exports to EU a couple of years ago led us to look for new markets and we did and that is now paying dividends.”

In the last few years, meat and meat products have been added to the list of food exports. Their export earnings have been on the rise and in eleven months of FY12 has grown 15 per cent to about $160 million.

Whereas combined exports of rice, fish, meat, fruits and vegetables generally fetch the largest chunk of food export earnings, occasional exports of wheat and sugar add up to them. But as food imports almost always grow faster than exports food, trade balance falls in deficit. In FY10 this deficit had, however, plunged to just $300 million.

“The falling trend in food trade deficit would have continued had we not seen the worst ever floods of our history (that raged in the first quarter of FY11). The floods hampered food exports growth on the one hand and increased food imports on the other because of additional requirements of the flood-affected people,” says an official of Sindh Agriculture department.

On exports side, wheat products including wheat flour and a few meat products brands have been showing constant growth. . But consumers complain of high food inflation and economists continue to point out high incidence of poverty and growing food exports are blamed at least in part for the situation.

Development of new varieties of rice and wheat with potential of higher per acre yield, focused efforts to find markets for maize flour and production of exportable confectionary items as value-added products of wheat flour and sugar could be the answer to the problem.

Equally important is developing packaging industry for fish and fish products and meat and meat products to fetch much higher per unit value. The same is true in case of exports of vegetables and fruits whose shelf-life could be enhanced by using modern techniques of processing, preservation and packaging.

Curbing smuggling of live animals and food items like wheat flour and sugar to neighbouring countries and controlling post-harvest losses in food grains, vegetables and fruits is also too important to be ignored.